Underwriting
Underwriting means insuring. An insurance company underwrites your policy when it agrees to take the risk of insuring your life or covering your medical expenses in exchange for the premium you pay. An investment bank underwrites an initial public offering (IPO) or a bond issue when it buys the shares or bonds from the issuer and takes the risk of having to sell them to individual or institutional investors to recover its investment.
V
Volatility
The term volatility indicates how much and how quickly the value of an investment, market, or market sector changes. For example, because the stock prices of small, newer companies tend to rise and fall more sharply over short periods of time than stock of established, blue-chip companies, small caps are described as more volatile. The volatility of a stock relative to the overall market is known as its beta, and the volatility triggered by internal factors, regardless of the market, is known as a stock's alpha.
Volume
Volume is the number of shares traded in a company's stock or in an entire market over a specified period, typically a day. Unusual market activity, either higher or lower than average, is typically the result of some external event. But unusual activity in an individual stock reflects new information about that stock or the stock's sector.
Y
Yield
Yield is the rate of return on an investment expressed as a percent. Yield is usually calculated by dividing the amount you receive annually in dividends or interest by the amount you spent to buy the investment. In the case of stocks, yield is the dividend you receive per share divided by the stock's price per share. With bonds, it is the interest divided by the price you paid. Current yield, in contrast, is the interest or dividends divided by the current market price.
Yield curve
A yield curve shows the relationship between the yields on short-term and long-term bonds of the same investment quality. Since long-term rates are characteristically higher than short-term rates, a yield curve that confirms that expectation is described as positive. In contrast, a negative yield curve occurs when short-term rates are higher.A flat or level yield curve occurs when the rates are substantially the same.
Yield to maturity (YTM)
"Yield to maturity is the most precise measure of a bond's anticipated return and determines its current market price. It is also known as redemption yield. As the name suggests, if an investment is held till its maturity date, the rate of return that it will generate will be Yield to Maturity.
Calculation of YTM is a complex process which takes into account the following key factors:
- Current Market Price
- Par Value
- Coupon Interest Rate
- Time to maturity"
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